Coca-Cola's Health Kick Fails to Offset Challenges Overseas

Pushing more wholesome beverages, water and smaller cans, especially at home in the US, lets the company woo consumers and generate higher profit margins. But currency fluctuations, sluggish international economies and pressure on its core soda business continue to cloud Coca-Cola's future.

Earnings may decline as much as four per cent in the coming year, hurt in part by a sweeping overhaul of its operations, Coca-Cola said Thursday. In a plan underway for years, the beverage giant is offloading large swaths of its company-owned bottling operations. Coca-Cola is on track to complete spinoffs of all its US bottling in 2017.

The company, which sells products in more than 200 countries, also is dealing with especially strong headwinds in emerging markets such as Latin America. Coca-Cola is facing "persistent macroeconomic pressures in our emerging and developing markets," Chief Executive Officer Muhtar Kent said in a statement.

The Atlanta-based company reported a two per cent decline in sparkling-beverage volume during the fourth quarter. Its still-drink category - a proxy for some of its more healthful options - rose two per cent, but that remains a smaller piece of the business. Earnings amounted to 37 cents a share in the period, matching analysts’ estimates.

Three-Decade Low

In North America, the picture was brighter: Smaller package sizes helped revive soda sales in the fourth quarter and stem volume declines for the year. Sparkling-beverage volume grew 1 percent in the final three months of 2016. The company is coming off a grim stretch for the soft-drink industry: US per capita consumption hit a three-decade low in 2015, according to Beverage-Digest, a trade publication.

The great shrinkdown of its containers has improved Coca-Cola’s price mix, helping it meet earnings estimates in the latest quarter. And the company has made efforts to push other options with less sugar, aimed at consumers looking to curb their calorie intake. Coca-Cola Zero Sugar case volume grew by a percentage in the double digits in Western Europe during the fourth quarter. The company plans to expand distribution of the product in 2017 to more European markets.

Coke is also pushing Smartwater, one of its bottled-water brands, to new markets around the world, citing growth of the brand as a positive for the quarter.